q2fy12powerpreview101011

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October 10, 2011Visit us at www.sharekhan.com

Q2FY2012 Power earnings previewCoal supply choked sequential growth, Merchant power a gainer

Power generation to grow by 10% YoY but be flat

QoQ: In Q2FY2012, we expect power generation of

217.5 billion units (BU) in India. This reflects a very

healthy growth of 10.2% year on year (YoY) backed by

an 11% incremental capacity over last year. At the end

of Q2FY2012, the total generation capacity should be

around 1,82,600MW. Sequentially, we expect the all-

India power generation to remain flat, though there isa 3% capacity growth quarter-on-quarter (Q-o-Q).

Moreover, in this quarter we have observed that the

largest player, NTPC saw its existing plants record a

lower volume due to coal supply related issues. We

believe the September month of Q2FY2012 would

witness lower power generation due to these issues.

Generation growth flat sequentially on coal supply

issue: We believe the largest power generator NTPC

has faced several challenges during Q2FY2012 in many

of its plants across the country. Almost a month long

agitation in Singareni Collieries on the Telengana issuehas reduced coal availability in the region which has

affected power generation at NTPCs Ramagundam

based super thermal power of 2,600MW and its Simhadri

plant. As a result of this, power generation at the

Ramagundam plant is expected to drop to 1,500 million

Quarterly estimates Rs (cr)

Company Net sales OPM (%) Adj PAT

Q2FY12E % YoY Q2FY12E YoY bps Q2FY12E % YoY

Power generation

CESC 1,235.0 11.8 22.8 (566.3) 121.9 (21.4)

NTPC 13,258.8 2.1 22.0 (3.1) 1,937.8 (8.0)

Neyveli Lignite 1,055.4 (0.7) 32.4 (106.4) 308.8 12.8

Nava Bharat 251.8 (12.6) 25.9 (834.8) 54.7 (35.5)

Transmisson & Districution EPC

Kalpataru Power 704.3 11.5 11.3 (28.6) 40.4 (2.3)

Jyoti Structures 623.5 15.0 11.3 (33.8) 25.7 3.3

*This company is under our coverage

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units (MU) in the month of September 2011, against

1,850MU in August 2011. Similarly, some of NTPCs large

plants have faced a shut down at various locations

during Q2FY2012. The Talcher plant of NTPC faced

environmental issues in July while coal and water

supply constraint affected the production of the Dadri,

Singrauli Farakka and Kahalgaon plants.

Power deficit to hover around 5%: The requirement

for power is expected to be flat Q-o-Q at 228BU. On a

Y-o-Y basis power requirement is likely to grow by 9.5%.

In the meanwhile, the availability of power is estimated

to grow by 11.4% YoY and 1.6% QoQ. Hence, power

deficit is expected to fall in the range of 5-6% against

7% in Q2FY2011 and 6.6% in Q1FY2012.

Merchant power prices shot up especially in last

month of Q1FY2012: It is clearly depicted in the chart

that the last month of Q2FY2012 witnessed a sharp

rise in merchant power price which according to us

could be on account of lower power generation. As

mentioned in the above table, we expect power

generation of around 70BU in the month of September,

around 3-4BUs lower compared to the previous two

months of the quarter. While merchant power prices

remained at sub Rs4 levels in the first two months of


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3Sharekhan Special October 10, 2011

sharekhan special Q2FY2012 Power earnings preview

We estimate a sequential volume decline of 7%, which

will lead to a revenue decline of 6.4% to Rs13,258 crore.

NTPC is expected to report an operating profit of

Rs2,917 crore in Q2FY2012, a 3% decline Y-o-Y but a

1.8% growth Q-o-Q. The companys operating profit

margin is to expand by 38bps YoY but contract by 115bpsQoQ to 23.5%.

The PAT is estimated at Rs1,938 crore with an earnings

per share (EPS) of Rs2.4. This reflects a de-growth of

8% YoY and 7% QoQ.

Neyveli Lignite


Particulars Q2FY12E YoY (%) QoQ (%)

Energy sent out (MU) 4366 0.9 (9.2)

Net revenue 1,055.4 (0.7) (8.7)Operating profit 342.0 (3.9) (3.5)

PAT 308.8 12.8 (9.9)

EPS (Rs) 1.84 12.8 (9.9)

OPM % 32.4 (106.4) bps 176.1 bps

We expect Neyveli Lignite Corp (NLC) to report a flat

revenue growth Y-o-Y while sequentially sales are

expected to decline on account of lower power sent

out by 9%. The revenue is expected to be Rs1,055 crore

in Q2FY2012.

NLC is likely to report an operating profit of Rs342crore in Q2FY2012, which is a decline of 4% YoY and

3.5% QoQ. The OPM is expected to be 32.4% during

Q2FY2012.

Despite a lower operating profit Y-o-Y, we expect the

PAT to grow by 13% as we expect an effective tax rate

of 25% against 30% in Q2FY2011. The PAT for Q2FY2012

is estimated at Rs309 crore with an earnings per share

(EPS) of Rs1.84. This reflects a growth of 13% YoY but a

decline of 10% QoQ.

Nava Bharat VenturesQuarterly estimates Rs (cr)


Energy sent out (MU) 357.4 (12.9) 3.1

Blended tariff (Rs/unit) 3.9 (3.9) (1.1)

Ferro alloy volume (ton) 17,817.7 (13.6) 13.7

Net revenue 251.8 (12.6) 6.0

Operating profit 65.2 (33.9) 8.0

PAT 54.66 (35.5) 6.1

EPS (Rs) 6.68 (35.5) 6.1

OPM % 25.9 (834.8) bps 47.2 bps

Nava Bharat Ventures Ltd (NBVL) is expected to

generate 357 million units of power during Q2FY2012,

which is a 13% decline Y-o-Y but a 3% growth Q-o-Q.

The blended tariff is expected to be around Rs3.9 per

unit in Q2FY2012, 4% lower Y-o-Y and flat over the last

quarter. The blended tariff includes merchant tariff of

Rs4.2 per unit and transfer pricing of Rs2.8 per unit tothe ferro alloy division. Effectively, we expect the

power revenue to decline by 16% YoY but grow by 2%

QoQ to Rs141 crore in Q2FY2012. The ferro alloy division

is expected to report a sales de-growth of 18% YoY but

a growth of 12% QoQ to Rs100 crore, which would be

primarily influenced by volume changes. Effectively,

we expect total sales of Rs252 crore, which includes

sales of Rs34 crore from the sugar division and Rs23

crore from the intersegment. This indicates a decline

of 13% YoY and a growth of 6% QoQ.

We expect the OPM of the company to contract by835bps Y-o-Y but remain slightly higher by 47bps on a

sequential basis at 26%. We expect the operating profit

to be around Rs65 crore, reflecting a decline of 34%

YoY and a growth of 8% QoQ.

The profit after tax (PAT) is estimated at Rs55 crore

with an EPS of Rs6.7. This reflects a de-growth of 36%

YoY and 6% QoQ.

Kalpataru Power Transmission


Particulars Q2FY12E YoY (%) QoQ (%)Net revenue 704.3 11.5 20.5

Operating profit 79.6 8.8 19.3

PAT 40.4 (2.3) 20.4

EPS (Rs) 2.64 (2.3) 20.4

OPM % 11.3 (28.6) bps (11.3) bps

Kalpataru Power Transmission Ltd (KPTL) is expected

to report sales of Rs704 crore, a growth of 12% YoY and

21% QoQ. The Y-o-Y growth is supported by an improved

order book position compared to the previous year.

The current order book stands around Rs5,000 crore.

KPTL (the stand-alone business) is having a strong order

book of more than Rs5,000 crore (1.8x FY2011 revenue)

with an average execution period of 22 months. The

consolidated order book (including that of JMC Projects)

stands at Rs9,000 crore.

We expect KPTLs operating profit to grow by 9% YoY

and decline by 19% QoQ. Its OPM is estimated to be

11.3% in Q2FY2012. We estimate a net profit of Rs40

crore, reflecting a decline of 2% YoY but a growth of

20% QoQ. Therefore, we expect an EPS of Rs2.6 during

Q2FY2012.


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4Sharekhan Special October 10, 2011

sharekhan special Q2FY2012 Power earnings preview

Jyoti Structures



Net revenue 623.5 15.0 (2.2)

Operating profit 70.5 11.6 0.5

PAT 25.7 3.3 (1.9)

EPS (Rs) 3.13 3.3 (1.9)

OPM % 11.3 (33.8) bps 30.1 bps

We estimate the Q2FY2012 revenue of Jyoti Structures

Ltd (JSL) at Rs624 crore, which is a growth of 15% YoY

and a de growth of 2% on a sequential basis. We believe

the company has a healthy order book (worth Rs4,000

crore) which is 1.7x FY2011 sales.

JSL should notch an OPM of 11.3% in Q2FY2012, showing

a margin contraction of 34bps YoY but an expansion of

30bps over Q1FY2011. We estimate the operating profitof JSL at Rs71 crore for Q2FY2012.

The net profit of JSL should grow by 3% YoY but decline

by 2% QoQ to Rs26 crore. This translates into an EPS of

Rs3.1 for the period.

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q2fy12powerpreview101011

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